The Actual Money Multiplier Is Smaller Than the Simple Money

question 78

Multiple Choice

The actual money multiplier is smaller than the simple money multiplier because:

• A)the actual multiplier affects M2 rather than M1.
• B)cash withdrawals reduce the amount banks can lend out.
• C)the actual multiplier affects the amount of excess reserves each bank holds.
• D)the size of the simple multiplier depends on the volume of deposits unlike the actual multiplier.
• E)the actual multiplier uses a different measure of reserve requirements.

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Definitions:

Type II Error

The statistical error that occurs when a test fails to reject a false null hypothesis, also known as a false negative.

Simultaneously

Simultaneously means occurring, operating, or done at the same time.

Inverse Relationship

A relationship between two variables in which an increase in the value of one variable leads to a decrease in the value of the other variable, and vice versa.

Type I Error

The mistaken dismissal of a correct null hypothesis, referred to as a "false positive."